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perform sensitivity analysis of a measure of merit ( net annual worth and net present worth) to variation over range of +-100% Part II: Sensitivity

perform sensitivity analysis of a measure of merit ( net annual worth and net present worth) to variation over range of +-100%

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Part II: Sensitivity Analysis 1. Preform sensitivity analysis of a measure of merit (net annual worth and net present worth) to variation, over a range of +100% of some selected input cash flow parameters and graph the results. This analysis is intended to tackle the impact of errors in estimating various values of the input parameters. The Dominion company has decided to conduct the sensitivity analysis with the aim of providing the higher management with information concerning the risk behavior on investment economic effectiveness due to possible uncertainty for some critical input cash flow parameters. The selected parameters for the analysis are: a) Discount rate: some reports anticipate projected increase on lending interest rate in the near future b) Expected life of the project c) Electricity price d) Plot the one-at-a-time where x = percent deviation from most likely value and y= Annual worth (dollar) e) Plot the one-at-a-time where x = percent deviation from most likely value and y= Present worth (dollar). 2. Define the most sensitive parameters and perform a muitiparameter sensitivity analysis for this problem. Draw a diagram to illustrate your answer where x=change in parameter 1, and y=change in parameter II. (Hint: two graphs for net annual worth and net present worth)

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